JimPinto.com - Connections for Growth & Success™
No. 205 : 13 March 2006

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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Honeywell continues to generate growth & success

Following my recent 2005 updates on Emerson and ABB, I thought a Honeywell update would be worthwhile.

In 2005, Honeywell generated $ 27.7B revenues, 5% organic growth (8% growth including 37 acquisitions and 21 divestitures). Profit increased to 12.3% (vs. 11.6% in 2004). The stock is doing well at about $42, with market-cap of $ 35B. CEO David Cote feels the company is making significant progress as "One Honeywell".

Automation & Control Solutions (ACS) generated revenues of $9.4B in 2005, with $ 1.1B in profit, and expects to grow 7% in 2006 with improved profitability.

I feel that I have a good relationship with Jack Bolick, President of Honeywell Process Solutions (part of ACS), and asked him some direct questions. As always, his response was fast, direct, positive, and enthusiastic.

Jim Pinto: Jack, Where can I find the latest numbers for Honeywell Process Solutions?

Jack Bolick: Process Solutions does not publish separate financials. Our financial information is rolled up into the overall Automation and Control Solutions (ACS) business performance. There's a link to the presentations on our website (web links below).

Q: How is Process Solutions doing in the Honeywell Corporate mix?
A: Process Solutions is an integral part of Honeywell, within the Automation & Controls business. We continue to demonstrate strong growth, margins and cash flow. The corporation continues to invest in this business through acquisitions and R&D. Our story and performance are solid and improving quarter over quarter.

Honeywell is accelerating the rate at which we share technology innovations between the business groups. Our advancements in wireless technology are an excellent example of this. We have wireless technology and products across multiple businesses and we are actively sharing that technology to develop industry specific solutions.

Q: Emerson reported winning over refinery customers in several recent projects. Is this an important market for Honeywell? How is Honeywell Process Solutions responding?
A: Not sure I agree that Emerson is winning refinery customers. I saw your latest newsletter which referenced Emerson's British Petroleum (BP) Refinery win. As you might imagine, we have a pretty good grasp of the opportunities that are won and lost in the markets we serve and every year a small percentage of the overall market share is swapped between the major vendors. However, in the grand scheme of things, the market share churn represents very little of the overall revenue and growth opportunities. Emerson does a better job of beating its chest when they win a project such as BP, but I can tell you that they are not winning more from our installed base than we are from theirs.

You ask how we respond. That answer is pretty simple. We strive to put the best value proposition in the market place to meet customer demand at the most cost effective price point possible.

Q: Honeywell Experion is Win NT 2000 based, the newer systems are Windows XP based. How is the conversion progressing? How is the new Experion C-300 faring?
A: Many Experion products are offered on both Win 2000 and Win XP. We have been naturally progressing the operating system from NT 2000 to Win XP to minimize impact on customer migrations. Experion has supported Windows XP for clients (stations) and Windows Server 2000 for the Experion server for several years. Experion R300 supports Windows Server 2003. It has been a straightforward exercise for us to move ahead with Windows releases as they come out.

The Experion R300 release (which includes the new form factor controller, the C300) has been well received by current and new customers. We started shipping product in December 2005 and will be in full production within the next 100 days. Interest and demand in R300 is high, which is exciting for us. We also just received awards from Control Engineering and Plant Engineering magazines for the new product.

Q: Is the switchover from Rockwell ControlNet complete? Smooth? Is there still any Rockwell/A-B involvement?
A: ControlNet is still an important part of the Experion topology since there are many devices, particularly PLCs, which are designed to run on ControlNet. Our support of ControlNet and our collaboration with Rockwell is still strong. The C300 controller was designed to connect directly with Ethernet but is still capable of communicating with ControlNet based devices (specialized I/O and PLCs) in a native peer-to-peer fashion through our ControlNet Interface. We want to continue our company's relationships to look for opportunities that will mutually benefit our customers and shareholders.

Q: It's been reported that Experion graphics were done in Australia. Was that from Citect? What is Honeywell's response to the Schneider acquisition of Citect? How much of Honeywell Process Systems software is buyout/outsourced?
A: Honeywell has a large development center in Sydney where our HMIWeb technology used in Experion PKS was developed, and it continues to be a large part of the Experion software development team. We have been operating in Australia since 1962, the development center employs over 130 engineers, is Honeywell owned and unrelated to Citect. We obviously use a large amount of infrastructure software from Microsoft, but other than that the vast majority of the software we supply is developed internally. We rarely see Citect competitively and don't think the acquisition really affects us.

Q: Jack, After being at the helm of Honeywell Process Solutions for a couple of years, how are YOU doing?
A: I'm doing very well. With more than three years at the helm, I am really beginning to settle in and am quite excited about our future. The first couple of years we really needed to be focused on getting the business stabilized, put strong business processes in place and setting a strong strategy in place for growth over the next 5-10 years. That is done. The foundation is there and now we can focus on becoming quite aggressive in customer pursuits as well as in investment in our people and our innovative products, services and solutions. I really believe that this is a great time to be a part of this business - we see a nice long-term run as a growing and profitable business.

Q: By the way, it's been reported on the weblog that JimPinto.com eNews and website are still on the Honeywell blocked-list. Can you find out whether this is so?
A: I get JimPinto.com eNews regularly, and just got the JimPinto.com website through our Honeywell firewall. This should not still be an issue. I have tested it, and so have many people around me and we have no trouble accessing the site. If you continue to get that kind of feedback, please encourage them to contact me directly so that I can make sure that, wherever they are, they can gain access to your site.

Click Latest Honeywell Investor Presentations

Click The New Honeywell Corporate Culture

Click Provide your own feedback on the Honeywell weblog

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The Middle East Oil Bonanza

What do YOU think is happening with all the oil wealth being generated in the Middle East? Politics aside, the Dubai Ports deal is just one relatively small part of the great Mideast oil boom. Oil money is creating enormous private wealth which is reshaping Middle East business and society.

While parts of the Mideast - notably Iraq, Afghanistan, Israel and Palestine - are wracked by violence and strife, other dictator-run countries are using their oil wealth to generate new heights of affluence and luxury.

Last year (2005) alone, with oil prices in the $65-per-barrel range, about half-a-trillion dollars landed land in the lap of OPEC countries, and the Middle East got $320 billion - more than at any time since the boom times of the 1970s and 1980s.

During the last oil boom (1973 - 85) the oil price spike created inflation and slow growth worldwide. Arab states, unprepared for their newfound wealth, socked money away in US Treasuries and international banks. This time around, they are spending much more at home on local investment and consumption, shoring up global demand for goods, and balancing out the effect of their huge export earnings.

And more Mideast money is venturing abroad. A large chunk of the billions is going into deals in the US, Europe, and Asia. Dubai Ports, for example, did not just cut a deal for British P&O (which owned US port facilities); it also bought the port operations of Florida's CSX for $1.2B. And there's much more investment in minority (but significant shareholdings in many major US companies.

Dubai International Capital, the private-equity arm of the Dubai government's oil money depository, paid $1.2B for a 2% stake in DaimlerChrysler. Mubadala Development of Abu Dhabi acquired 5% of Italian carmaker Ferrari. Almost 6% of Citibank is owned by just one Saudi prince, the single largest shareholder.

Perhaps more ominous - how much oil money is going to the support of terrorism? All devout Muslims are required to tithe 2 1/2% of their income; so how much Saudi oil money is contributed to support radical Wahabi mullahs? In Iraq, which depends almost exclusively on oil for its revenues, diversion of oil money adds a new and menacing element. Read the US News & World Report article (weblink below).

Click Beyond the Dubai Ports deal - Where all those billions are going

Click US News & World Report - The Saudi Connection

Click NY Times - Oil Graft Fuels the Insurgency

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Patent Torts

The patent fiasco between RIM (Blackberry) and NTP is a replay of the patent fiasco which was rampant in the automation business a couple of years ago.

You may remember, a company called Solaia purchased some Schneider software patents and filed suit against several companies for infringement. Solaia extracted several millions from several suppliers and end-user who felt that a patent infringement defense would be more costly than simply paying up for the Solaia license.

Happily, Rockwell Automation eventually filed suit and won against Solaia, and the blood-letting stopped. The Solaia case is now a dead issue. But the companies that had already paid the Solaia ransom have kissed their money goodbye.

The $612.5 million settlement reached in the recent RIM vs. NTP battle simply indicates that the US patent system is broken. In this case, the court apparently could not wait for the patent office to review NTP's patent claims, some of which have already been negated.

It all boils down to the expense of fighting off patent claims from companies that hold patents but produce no products. In RIM's case, there was the added hysteria over a possible injunction and shutdown.

The desire to encourage innovation may be have resulted in an overly bureaucratic system that's prone to abuse.

Click RIM v. NTP ended with a $612.5 million settlement

Click RIM, NTP and Patent Madness

Click Solaia patent bust

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Podcasts - good way to listen while you walk/work/drive

Podcasting is the automatic distribution of audio or video files via the Internet for listening on personal computers or mobile devices.

You can always download an MP3 file when you choose, to listen later. The neat thing about Podcasts is that you can arrange for automatic delivery of new content through an "aggregator". You simply subscribe (free) to a set of feeds and the aggregator downloads any available new items at regular intervals.

Podcasting's essence is about automatically creating content (audio or video) for you to listen when you want, where you want, and how you want. That's what distinguishes "podcasts" from simple downloads.

If you have a portable MP3 player, or iPod, you can listen to podcasts as you go for your morning jog, or in your car as you drive to work. I have a Monster iCarPlay Wireless FM Transmitter with my iPod, which plays the audio through my car radio. Cassette adapters and other gadgets are also available for the same purpose.

If you have an iPod, you can use Apple iTunes as your aggregator and subscribe to an RSS feed to download your selections directly to your iPod.

Here's an interesting tweak - instead of just listening to music while I drive, I've started to listen other audio content - famous speeches, business-guru interviews and the like. Lots of good (free) stuff available. Try it, you'll like it!

Question: If I offered JimPinto.com eNews as a "Podcast", how many would use it? Please send me an email - link below.

Click Please send email to let me know if you'd like eNews Podcasts

Click Automation World Editor Gary Mintchell - Grow Your Learning Pool

Click Gary Mintchell's Podcasts - "Automation Minutes"

Click Podcast Directory

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WeeGallery - smart art for babies

You may remember WeeGallery.com, the web-business started by my son David Pinto and his wife, the talented artist Surya Sajnani. By the way, Surya did the cover for my new book, Pinto's Points.

Well, I'm happy to report (with nepotistic pride) that Weegallery is doing well. Last year (2005) Weegallery exhibited at the Moscone Center Gift Fair in San Francisco, and at the International Gift Fair in New York. Weegallery products are now offered at the San Francisco Museum of Art, several major baby-goods stores, Amazon.com and other online merchants. Simply Google "Weegallery" and see what happens.

Recently, Weegallery has attracted significant press coverage which is resulting in a good surge of growth. Read this summary of the concepts behind Weegallery products from the magazine UrbanBaby:

    "Forget color and shades of gray – newborns like contrast, so seeing things in black and white is just their speed. The equation, which caught on a few years back when this preference first came in vogue, went something like this: Black-and-white mobile = smart baby = genius kid = hot preschool = future Harvard alumnus.

    "It didn't matter what the actual shapes were – scary faces, silly stick drawings, tedious patterns – contrast was the key, no matter its effect on the nursery decor. So you sacrificed beauty for brains, and wound up with lots of boring, but mentally stimulating "art" hanging from the walls and ceiling.

    "Parents today have a much better option. Wee Gallery, founded by artist Surya Sajnani, features hand-painted original works of art that take advantage of the visual strengths of infants. Sajnani created the images for her own child (a fish, giraffe, owl, snail, peacock, cat and elephant) with patterns designed to interest baby at different stages.

    "The line includes a mobile, flash cards, stationery, and fun wall graphics featuring an oversized, very cool giraffe, and an excellent elephant. With these decals, you can create a custom wall design anywhere in your baby's nursery with a simple peel-and-stick motion. And should you decide you're ready for a different look, no problem. The decals are removable and can be repositioned in a new location.

    "Never has applying oneself been so easy."

Weegallery is coming up with several new products. A whimsical new book, "What Should We Call the Twins" suggests some interesting twin-baby names (like Pete and RePete" to get your thinking process started. And other interesting new baby-art products are on the way.

Click Read the "UrbanBaby" article - Stick 'Em Up

Click Smart Art for Little Minds - Visit WeeGallery.com

Click The WeeGallery Story

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Canadian Diana Bouchard [dianab@aei.ca] comments on the ongoing "Oil Crisis" in the USA:
    "I cannot resist writing you in response to your recent piece on 'the ongoing oil crisis'. On my trips to the US from Canada, I am increasingly struck by the low priority accorded to energy efficiency of any kind.

    "We were in New York during the 60-cm snow dump on Sunday, Feb. 12. We ended up returning home to Montreal by taking a train to Albany, staying overnight and eventually flying Albany-Toronto-Montreal.

    "In the motel where we stayed overnight, the windows were SINGLE glazed and covered with condensation even at minus 4-5 C. I cannot imagine how they heated the place at minus 20 (which certainly occurs in Albany NY), other than cranking up the furnace (and the fossil fuel consumption) to try to compensate for the heat losses. In any country that takes energy conservation seriously, this situation would have been fixed long ago.

    "The newly built (or newly remodeled) hotel we stayed at in NYC did have double-pane windows, but in metal frames without a thermal break. So the glass was fine, so the frames were cold. Not rocket science ..."

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Mathieu van den Bergh [mathieu-van-den-bergh@cox.net] insists that gasoline taxes are usually used for other purposes:

    "Coming from Europe, and being there every 3 months or so, inundates me with info that seems to contradict your some of your writings. I doubt that there are any politicians who are willing to commit political suicide by proposing the higher gas taxes you advocate.

    "Unfortunately, the gasoline taxes in most European countries are not used for alternate energy programs, but rather to keep social security afloat as long as possible.

    "The big discussions in Europe (Germany - France - Benelux) are what portion of the social security to preserve, and which items to cut. Gasoline taxes play a very large role in that debate. Similarly, their "road taxes" (the literal translation of the name for the tax in just about all European countries) are not used just for roads either, but a big chunk goes into the same general funds kitty. This has caused major resistance, and there are several proposals around to force the collected funds to be used for roads, and/or public transportation infrastructure.

    "So, even though putting gasoline tax revenues into energy research may be a good "ideal" to strive for, it hasn't happened in California nor elsewhere - rather the contrary has happened.

    "Ironically enough, even though at a smaller scale then our gas guzzling SUV's, the trends in Europe are the same; More midsize sedans/bigger cars are sold, and average gas mileage there has gone down as well."

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Robert Unseld [Robert.Unseld@elektronikjournal.de] from Germany, commented on our discussions about cloning and genetic engineering:

    "Cloning will take the diversity out of the genetic pool. Scientists might ever know enough about this very complex system to play around. If ever, it might be as in C.J. Cherryhs 'Cyteen' (the cloning Project Ariane Emory), where nearly everything is possible in shaping people, animals, whatever. Very interesting science fiction book anyway (main topic: the cloning of a genius, plus reproduction of her mental structures; what is inherited by genetics, and what comes out of rehabilitation or experiences). But there would be only a small variation of types in reproduced populations (10 million identical Jims, 3 million Roberts...), and only some few million `real´ citizens with freely combined genes (lightly enhanced in some extent to ban physical handicaps).

    "Regarding genetically altered food: I read about some Italian scientists who found the genetic sequences of altered food in the blood and organs of cattle/pigs recently. That's a surprise, because normally the food shouldn't survive the passage through the stomach at all. Such news scares me a bit, to say the least."

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